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I've been in the business for almost 20 years (carpenter, superintendent, etc) but just got my general contractors license in '06. I went in business with a partner who had the financial backing I needed (I thought) and started my first spec house just before the market crashed. Of course no bank would give us a construction loan unless we both personally guaranteed it, so we did. After the crash, homes are sitting all around us. Values have fallen. We have not been able to sell it ($300,000 - huge discount, good price for the area), but did a lease purchase for a year. Now the lease is up and the tenants are leaving. My partner has no money left. I have enough equity in my personal home to make the payments for about a year, but of course don't want to go that route. We are about to go into default.

What should I expect next? And what would you do in this situation?
 

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Joe - Before I make any comments, let me say on behave of CT that introductions are in order. If you go to the intro section and say a little something about yourself and fill in your profile (where you live, etc) people here really appreciate that.

With that being said, WELCOME!

Sorry your in a pickle. There are many things to expect but, first i'd try to get anyone into that house as a rental even at a loss if you have to.

As far as what to expect? Well, depends on which mortgage company you have. 3 months is the short term for processing a foreclosure. You could have up to a year or two before its finalized and there's a Sheriff sale. Then you have another 12 months to short sell it. But, like I said depends on the mortgage company. Sometime they work with you.

You have to keep in mind that when you entered into this loan the bank is on the hook as well as yourself in terms of this house selling. There going to try to place all the responsibility on you but, they have an invested stake into it as well. And there the ones who decide whether it's a sound invest in the first place right? Do you think they want the house, hell no. It's in there best interest to refinance so they can keep bringing in cash.

My Cousin built a home on Lake Minnetoka here for $2.7m. He was in the same position. He had over $400,000 out of his own pocket trying to hold the place. Lowered to price to 1.7. Then he just couldn't take it anymore and told them to F***off. they where forced to refinance because they had a ton of other homes being foreclosed on and there portfolio was 95% in real estate. He eventually "moved into the house" so he wouldn't have to warranty it and let it go.
 

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1) Get a real estimate of value for that home. Even if you take a loss - and sell for less than you have in it you might be better off than trying to hold for a couple of years. Get a realistic number - get a straight talking realtor to evaluate ( not an appraiser )

2) If short sale is not an Option How about Refinancing? From your sales price - Can you get refinanced with an new long term loan ( FHA / FNMA ) ? Check this out. Maybe get your partner back in the mix with the refinance ( If both of you have the income, etc )

3) Then rent out , even if there is negative cash flow - the market will come back slowly over the next 4 years. It may be easier to feed it monthly and keep your credit.

4) Go back to your construction lender. Find out if the Feds are putting alot of pressure on your bank to get their real estate loan portfolios down and may be forcing you out of their bank. See if they will take less for the loan without damaging your credit.

Then refnance - you may pick up some cash / equity by paying off your construction loan.

5) Consider a lease option - rent the home with an option to buy and credit the tenant with some portion of their payment toward the purchase price.

6) BE A BUYER with your property - Offer to fix some other investor's problem by taking over their property with your property. Is there a run down house, apartment, land or other property that you could trade for.

You may be able to find someone that is desperate to get out of their investment - you probably have the fix up skills and other talents they don't have to solve a diffrent problem.

Don't be area bound - May be go out of your area to trade your property.

Don't be afraid to take a "Toy" ( Boat, Camper, Fishing lodge, Airplane ) in trade as a down payment. You want to move through this asset.

Get Creative.

Carry back financing

Get Started

Terry
 

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just kidding...god forbid. I agree. Get a new estimate and try to sell for anything. Foreclosure is not fun. It is scary for the family too.
 

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Oh snap. For the banks though it is Winterization season. Watch out they don't come breaking in the place. When that happens its all over.
 

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Oh snap. For the banks though it is Winterization season. Watch out they don't come breaking in the place. When that happens its all over.
He should be fine. The banks take FOREVER....to do a lock change, not to mention winterize.

My neighbor works through Fidelity with all these foreclosures so, I know all about how they operate.

Hell, a buddy of mines brother has a house that he hasn't paid on in 2 years! Keeps telling them "go ahead foreclose, I don't care". They wanted him to refi at HALF! and he turned them down, dumbass. He called them up couple months ago, "So, how long do I have before I'm kicked out?" They say they don't own the mortgage anymore and and infact after looking into it's turned over twice since and new lender isn't really aware it's in default (how couldn't they?) and when they do it will be another 12 months after that for foreclosure proceedings, which could easily turn into another 12mo. Go figure? So, he could be living there for another 2 years, no rent...
 

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Discussion Starter · #9 ·
If you go to the intro section and say a little something about yourself and fill in your profile (where you live, etc) people here really appreciate that.
Sorry. Just took care of that.
1) Get a real estimate of value for that home. Even if you take a loss - and sell for less than you have in it you might be better off than trying to hold for a couple of years. Get a realistic number - get a straight talking realtor to evaluate ( not an appraiser )
I am an appraiser. What's wrong with appraisers? ;) I know what you mean though. As long as you get someone with experience who's realistic, either is fine. There were way too many appraisers pushing the numbers a few years ago, but there are a lot of people looking over our shoulders right now.

Thanks for all the suggestions. We were already in a lease option, but the lease is up and the buyers want out. We both have other businesses that suffered too much to provide any of the payment on a refinance. I like the idea of trading. Could you explain a little more, or give an example? If the bank would agree to reduce the principle, I might be willing to match them with some carry back financing if my personal assets are already at risk anyway. The home was valued at $360k and we've already dropped it to $299k. We will most likely drop it further to $285k, but that's as far as we can go.

My biggest unknown is this: How likely is the bank to come after my personal assets, and how might that play out?
 

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JumboJack for president!
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He should be fine. The banks take FOREVER....to do a lock change, not to mention winterize.

My neighbor works through Fidelity with all these foreclosures so, I know all about how they operate.

Hell, a buddy of mines brother has a house that he hasn't paid on in 2 years! Keeps telling them "go ahead foreclose, I don't care". They wanted him to refi at HALF! and he turned them down, dumbass. He called them up couple months ago, "So, how long do I have before I'm kicked out?" They say they don't own the mortgage anymore and and infact after looking into it's turned over twice since and new lender isn't really aware it's in default (how couldn't they?) and when they do it will be another 12 months after that for foreclosure proceedings, which could easily turn into another 12mo. Go figure? So, he could be living there for another 2 years, no rent...

BEER MONEY!!!!:clap:
 

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you def will not be able to fha unless it becomes your primary res. and i really doubt fannie/freddie would touch the loan at this point. think about it... would you lend your money to someone in this situation? not trying to be mean, but that's the real world.

your best bet (and maybe the only bet) is to work something out with the current note holder. they are all so overwhelmed with requests that you may not get much of a response for some time.

should you elect to rent it, make sure your homeowner's insurance is correct. or you may not be covered if something were to happen.

either way, i would immediately contact an attorney and see what they may have for options for you. a foreclosure and chapt 7 afterwards may be the route if nothing else.

but always remember... getting advice in a forum may not work for your state or municipality. good luck and realize that this will pass =)
 

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My biggest unknown is this: How likely is the bank to come after my personal assets, and how might that play out?
Very likely. May take awhile but if you have any kind of cash accounts, that will most likely be the first, then any equity in anything is where they will go next, boats, cars, house, etc.

That should only take place when they, the lender, sells the house and they figure what their loses are. Which could take along time.

Some good advice here but, as stated before you really should call an attorney to weigh your options.

Ya know I have a friend who is an excavator and has been struggling past two years. He didn't pay his mortgage for 2 months and called (citimortgage) I'll spare ya the details, but he negotiated a $300K loan with a $2100/mo payment to $600/mo no interest for first year, then to go up 1% per year for 4 years to cap out. I still can't believe it. He is waiting for the paper work as I type this. Sometimes just calling your lender to discuss options is the way to go. Just food for thought. Good Luck!
 
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